Rain Delays Threaten Basis

Challenges moving grain from elevators amid rain and rising river levels could penalize farmers in the form of basis, explains Joe Vaclavik, Standard Grain. To make matters worse, producers are holding onto unprecedented old-crop supplies.

“If we get to a point where the pipeline gets backed up, there’s going to be no need or no urgency for the elevator or for anybody, really, to bid aggressively for corn,” Vaclavik tells “U.S. Farm Report” host Tyne Morgan. “I think that the basis market is at risk here as it is because we’re getting to a point where farmers want to clear out the bins, they want to get ready for new crop, they don’t want to have to look at this old-crop corn that’s been so frustrating for months and months and months. I think that the basis impact of this high water moving forward, and just the impact of what most people would probably describe as being excessive farmer-owned corn, it’s all bad for basis.”

“They’re emotional, they’re frustrating,” Utterback notes. “It’s not as bullish as we would like for the bulls to get rid of some of our inventory. But it’s pressuring the bear. I think this week we saw, after the crop conditions report, soybeans took off on the crop conditions ratings decline, and it’s a time where the seller should be very cautious.”

Over the next two or three weeks, Utterback concludes, the market will try to determine whether there is “enough bullishness from a yield reduction in the next two supply-demand reports and the June 30 report to drive the bears to the sidelines a little more aggressively.”